Arbitral tribunal can convert Section 9 petition to Section 17 application and grant interim relief without Statement of Claim

The Delhi HC dismissed an appeal against an arbitral tribunal's interim order under Section 17 of the Arbitration Act. The tribunal had treated a Section 9 petition as a Section 17 application and granted interim relief requiring the appellant to continue paying EMIs into a loan account. The HC held that: (1) tribunals can convert Section 9 petitions to Section 17 applications without legal prohibition; (2) Section 17 applications are maintainable even without prior filing of Statement of Claim, as amended provisions empower tribunals to grant interim measures to preserve arbitral process; (3) the tribunal's finding of prima facie liability was sustainable. The appeal was dismissed with directions to continue EMI payments during arbitral proceedings.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the Arbitral Tribunal had the jurisdiction to convert a Section 9 petition into a Section 17 application.
• Whether the absence of a Statement of Claim affects the maintainability of a Section 17 application.
• The interpretation of the MoU concerning the obligations of the appellant to pay EMIs into the loan account of RBT.
• The appellant's challenge to the Arbitral Tribunal's finding of urgency justifying interim measures.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction to Convert Section 9 Petition to Section 17 Application

The appellant challenged the Arbitral Tribunal's decision to treat a Section 9 petition as a Section 17 application. The Court found that the conversion was requested by the Chadhas and was within the Tribunal's jurisdiction, given the holistic reading of the High Court's order appointing the Tribunal to adjudicate the disputes, including those raised in the Section 9 petition.

Maintainability of Section 17 Application Without Statement of Claim

The appellant argued that a Section 17 application is not maintainable without a Statement of Claim. The Court disagreed, noting that the arbitral process allows for interim measures to be granted to preserve the arbitral process, even before a Statement of Claim is filed. The Court cited the amended Section 17, which empowers the Tribunal to grant interim measures during arbitral proceedings, which commence upon notice of arbitration.

Interpretation of the MoU and Obligations of the Appellant

The Tribunal's interpretation of the MoU, particularly Clause 4(b)(iii), was challenged. The Tribunal found that the appellant had not fulfilled his obligation to infuse an "equivalent amount" into RBT's loan account, as required by the MoU, before the Chadhas and Guptas were obligated to infuse their respective amounts. The Court upheld this interpretation, noting that the MoU required the appellant to infuse funds personally, not merely through RBT's receivables.

Finding of Urgency for Interim Measures

The appellant disputed the Tribunal's finding of urgency, arguing that no immediate threat of SARFAESI proceedings existed. The Court found that the Tribunal's decision was based on a reasonable apprehension of the loan account being declared an NPA, justifying interim measures to prevent such an eventuality.

3. SIGNIFICANT HOLDINGS

Jurisdiction and Conversion of Applications

The Court held that the Arbitral Tribunal had the jurisdiction to treat the Section 9 petition as a Section 17 application, as the High Court's order implicitly allowed adjudication of all disputes, including interim measures.

Interim Measures Without Statement of Claim

The Court established that a Section 17 application could be maintained without a prior Statement of Claim, emphasizing the need to preserve the arbitral process and the Tribunal's power to grant interim measures during proceedings.

Interpretation of Contractual Obligations

The Court upheld the Tribunal's interpretation of the MoU, requiring personal infusion of funds by the appellant into RBT's loan account before any obligation on the Chadhas and Guptas arose. The Tribunal's interpretation was deemed reasonable and consistent with the MoU's terms.

Assessment of Urgency

The Court affirmed the Tribunal's discretion in assessing urgency for interim measures, noting that the Tribunal's finding was supported by factual material and was not arbitrary or perverse.

In conclusion, the Court dismissed the appeal, affirming the Arbitral Tribunal's order directing the appellant to continue paying EMIs into RBT's loan account during the pendency of arbitral proceedings. The Court emphasized the limited scope of interference with the Tribunal's discretionary orders unless they are arbitrary or capricious.

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